Set to take effect on 31 January, the new regulations will alter the qualifications for being recognised as a 'high net worth individual'. The criteria will shift from requiring an annual income of £100,000 and net assets worth £250,000 to demanding an annual income of £170,000 and net assets valued at £430,000.

However, numerous entrepreneurs, investors, and business organisations are voicing concerns that these changes will adversely affect the availability of finance for startups, with female and underrepresented entrepreneurs expected to be the most impacted.

In a collective open letter, various groups including the Startup Coalition, the Entrepreneurs Network, and the UK Business Angels Association, have called on the chancellor to reconsider the impending amendment to the definition of a high net worth individual investor.

The open letter criticises the proposed rule change, labelling it as detrimental to the thriving startup ecosystem currently in place. The letter argues that the timing of this change is particularly harmful, potentially destabilising the ecosystem during a sensitive period.

Representatives from the tech sector expressed concerns that the change would not only limit available capital for startups but also disproportionately affect women and other underrepresented groups within the investment community.

The letter highlights the challenges faced by underrepresented founders in accessing capital and cautions that the proposed changes could further marginalise female and ethnic minority angel investors. It warns that angel investing might become an exclusive activity, undermining significant progress made in diversifying the field.

The letter advocates for maintaining the diversity and openness in investing, emphasising how technology such as crowdfunding and angel syndicates platforms have democratised the startup ecosystem.

Concluding, the letter warns that the proposed changes could regress angel investing to an elitist activity, alienating many from the growth of the UK’s tech sector.

An article on Sifted reports that: “We’ll witness a 90% decline in women who could angel invest in Wales on the basis of income, and a 100% fall in the North East of England and Northern Ireland, meaning women no longer qualify at all. It’s also fair to assume that people who qualify will be more likely to be White rather than Asian (other than Indian) or Black.

The exemptions and the financial thresholds necessary to qualify as an investor have remained unchanged since 2005. However, technological advancements, including the emergence of online investment platforms like Crowdcube and Seedrs, both regulated by the FCA, have enabled more individuals to fulfil the criteria for certification as sophisticated investors.

Now, to qualify as a sophisticated investor, one must either be a director of a company with a turnover of £1.6 million, have been part of an angel syndicate for the previous six months, or have worked professionally in private equity for two years.

While the aim of this change is to safeguard consumers, it effectively restricts angel investment to the wealthiest individuals, particularly in regions with lower earnings. This shift also negatively affects female-led businesses seeking investment, as they often rely heavily on angel investment due to receiving only 2% of venture capital funding.

Clearly, this change is a big concern and many are calling for an immediate reverse to the new rules before the current pool of angels is compromised.